The Organization of Petroleum Exporting Countries (OPEC) is poised to keep crude oil production at current levels and adopt a wait-and-see stance at a weekend meeting here amid elections in Iraq and booming Chinese demand, OPEC ministers said.
Comments from ministers indicating they would leave output at current levels sparked a sell-off on global crude markets as investors sought to book profits on recent gains, anticipating that a decision to cut production would not come until OPEC's next planned meeting in Isfahan, Iran, in March.
The OPEC president, Kuwaiti Oil Minister Sheikh Ahmad Fahd al-Sabah, said upon arriving in the Austrian capital on Friday that many OPEC ministers are ready to support maintaining the oil cartel's production at the current official level of 27 million barrels per day.
"I think a lot of members will support continuing with the same" level of production, Fahd al-Sabah said.
The 10 members of OPEC, excluding Iraq, decided last month in Cairo to cut production by 1 million barrels per day from this month to bring real output closer to the organization's agreed target of 27 million barrels per day.
However, in recent weeks world oil prices have been rallying, supported by fears of possible attacks on pipelines in Iraq ahead of the country's landmark elections this weekend and amid concerns about demand for heating fuel on account of cold weather in some parts of the northern hemisphere.
In addition to the situation in Iraq, Algerian Oil Minister Chakib Khelil stressed concerns about how strong Chinese oil demand will be, obscuring the outlook for what action to take.
"We have two concerns for the next quarter, which is demand from China and supply from Iraq. If you can tell me what's going to happen for those two, I can tell you what we're going to do," Khelil said.
With an OPEC decision to hold output steady a foregone conclusion in the eyes of many traders, oil prices fell sharply as investors took profits.
Marshall Steeves at Refco in New York said the market saw "a pretty massive sell-off," adding: "Everybody priced in the fact that OPEC is not going to change its quota levels when it meets on Sunday."
He said traders were also cautiously optimistic that the Iraqi elections, taking place the same day, would proceed without an escalation of violence.
"So far, knock on wood, there has not been any further damage to the Iraqi pipelines," he said.
These factors helped take speculators out of the market after a failed effort to push prices through the 50-dollar-per-barrel level this week.
"Rather than wait for a formal communique to come out, people are taking their profits," Steeves said.
However, even though the oil market was betting that OPEC ministers would keep production steady on Sunday, some analysts suggested that the organization might nonetheless trim back production.
Deutsche Bank analyst Adam Sieminski in London said: "There is the worry that there will be too much supply in the second quarter. So maybe OPEC will do something on Sunday after all."
"I am leaning toward the idea that they will make a small cut at this meeting and then if the price goes too high, they'll change that at the [next] meeting in Iran in march," he added, saying that the organization could skim 500,000 barrels per day off current levels.
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